Reverse Auctions for Law Firms

Reverse auctions for legal services are an innovative tactic used by respected corporate legal departments to control the cost of legal services. Competitive bidding events such as reverse auctions are growing in relevancy and popularity as a way of reducing legal spend.

Argopoint works with legal departments to develop and implement programs for driving competition among legal service providers, drive down legal costs and align law firm incentives with client goals.

Reverse Auctions for Law Firms: Objectives

The Wall Street Journal has noted that “several big companies – including […] eBay Inc., Toyota Motor Corp. and Sun Microsystems – have used the tactic known as reverse auctions or competitive bidding, to pressure law firms to lower prices, especially on high-volume work such as tax filing and intellectual property transactions.”[i] Legal departments who have implemented reverse auction programs report many benefits, “saying standardized proposals and reverse auctions make it easier to more fairly evaluate firms’ cost-effectiveness on a uniform basis.”[ii]

Reverse Auctions for Law Firms: Overview

Argopoint offers corporate legal departments the frameworks, processes, models and training that are necessary to properly design and execute a Competitive Law Firm Event. Though some in the legal space are concerned that these competitive bidding events (i.e. reverse auctions) sacrifice quality, our knowledge and experience in this arena show that their concerns are often misplaced.

Our clients can review outside counsel based not only on price—but also quality and other critical capabilities—making it easier to make a well-informed decision. In this way, we employ the power of market forces to deliver optimal outside counsel for a specific legal service (or bundle of legal services) across a wide range of legal needs.

Reverse Auctions for Law Firms: Solutions and Savings

In our experience, Competitive Law Firm Events typically reduce legal costs for our clients by 15-25%. We have even designed bidding events that have reduced costs upwards of 40%, resulting in millions of dollars of savings in real terms.

Reverse auctions are not always the most appropriate short-term solution for every legal department. Legal professionals have voiced concerns that these competitive bidding events (i.e. reverse auctions) sacrifice quality. Such objections are often heavy with "apocalyptic scenarios" involving all business being awarded to the lowest bidder. However, our experience is that these concerns are often misplaced. Jeff Carr, General Counsel of FMC, debunks the myth that all corporate legal work is too sensitive to risk using a Competitive Law Firm Event: “Every lawyer will tell you that every piece of work they do is incredibly important and risky and has to be custom-made, and that’s just nonsense."